Nel's New Day

November 25, 2013

Wal-Mart, Not a Place to Give Thanks

Filed under: Uncategorized — trp2011 @ 8:29 PM
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In less than four days Wal-Mart opens its doors at 6:00 am on Thanksgiving day and stays open for 41 hours, trying to entice all the Black Friday shoppers into its stores. Almost 200,000 people have signed petitions protesting the new hours. If the company were not unfair to its 2.1 million workers, two-thirds of them in the United States, people might not be as upset. But the corporation has a reputation for paying its employees under the poverty level, an average of $8.81 per hour, and opposes any union structure.

Workers in 28 stores across 12 states went on strike, and a probe by the National Labor Relations Board (NLRB) is siding with the company’s labor force. Wal-Mart may have to rehire its fired workers because the company “unlawfully threatened employees with reprisal if they engaged in strikes and protests on November 22, 2012” and at other times. NLRB can also force Wal-Mart to tell workers of their rights to unionize.

Things are so bad at Wal-Mart that CEO Mike Duke quit this morning before tomorrow’s shareholders meeting.

Some Wal-Mart facts

  • Wal-Mart employs more people than any other company in the United States outside of the federal government.
  • The majority of its employees with children live below the poverty line, and the children qualify for school free lunches.
  • One-third of the employees are part-time, limited to less than 28 hours per week and thus ineligible for benefits such as health care.
  • Employees make 25 percent less after two years at the job than their unionized counterparts working for other companies.
  • Employees take home on average under $250 per week.
  • Last year, only 18 percent of hourly workers received any pay raise at all.
  • When the United Food and Commercial Workers tried to organize workers across the country, labor experts were brought in for “coaching sessions” (aka intimidation sessions) with personnel who support unionization. Employees complained that these were intimidation sessions.
  • Full-time employees are eligible for benefits, but the employees are required to pay 35 percent of the health insurance package.
  • Not one in 50 workers has amassed as much as $50,000 through the stock-ownership pension plan although Wal-Mart matches 15 percent of the first $1,800 in stocks purchased. (Voting power for these stocks remains with Wal-Mart management.)
  • Over 85 percent of its goods are made outside the U.S. and often in sweatshops.
  • Musicians are frequently forced to create “sanitized” versions of their albums specifically for Wal-Mart.
  • Wal-Mart has forced many U.S. manufacturers out of business.
  • The company has been the primary distributor of many goods attracting controversy, including Kathie Lee Gifford’s clothing line, Disney’s Haitian-made pajamas, child-produced clothing from Bangladesh, and sweatshop-produced toys and sports gear from Asia.

In the U.S., Wal-Mart makes over $13,000 in pre-tax profits per employee (after paying them), which comes to more than 50 percent of the earnings of a 40-hour-per-week wage earner. At the same time, Wal-Mart costs taxpayers $5,815 per employee for food stamps, welfare, Medicaid, etc. That’s over $1.7 million per year for just one store. Wal-Mart has over 4,000 stores in the U.S.

The six Walton heirs together own as much wealth as 40 percent of the U.S. population. Last year, four members of the Wal-Mart family made a combined $20 billion from their investments. Less than half that would have increased the salary for each Wal-Mart worker by $3 an hour, enough to end the taxpayer contributions for these employees.

When Wal-Mart stores arrive, small businesses close, and employees in other stores have their wages lowered. An example is the experience of supermarket employees in Los Angeles: just the possibility of a Wal-Mart opening there dropped the pay scale markedly for new hires. After public opposition kept Wal-Mart stores from coming into most of L.A., the pay scale went back up.

Thirty years ago, Wal-Mart displayed “Buy America” and “Made in America” signs, but the marketing program was fraudulent. Even then, the corporation was shifting its purchasing to Asia. At the beginning of this year, the company declared that it would put $50 billion into buying domestic goods over the next decade. That’s really 1.5 percent of its expenditure on inventory.

Most of this $50 billion will go into its expansion in groceries. With Wal-Mart taking over the grocery business—25 percent of it at the beginning of the year—other grocers lose business and buy less. The result is no new jobs but lower wages for workers. In the past decade, Wal-Mart’s gross from groceries has increased from 24 percent in 2003 to its current 55 percent, and the company plans to take over more of the grocery share with its Neighborhood Market stores and new supercenters.

Georgia towel maker, 1888 Mills, will provide Wal-Mart with “American-made towels” but will maintain its overseas workforce of 14,000. The U.S. factory will add only 35 jobs at $12-$14 per hour.

Wal-Mart has often been compared to its competitor Costco which  offers its employees an average wage of $21.96 an hour, about 40 percent more than Wal-Mart employees make. Wal-Mart’s profits sank the second quarter of the year while Costco saw a 19-percent increase. There’s another company, however, that should be a model for Wal-Mart as it goes into the grocery business.

WinCo, a small privately-held chain of 100 supermarkets in western United States, manages to undercut Wal-Mart prices. And how?

  • It cuts out distributors and other middle “men” by buying many goods directly from farms and factories.
  • It doesn’t accept credit cards.
  • Customers bag their own groceries.
  • Stores are organized and minimalist without frills and a tremendous variety of merchandise.
  • Employees have decent health care benefits for those who work at least 24 hours a week.
  • Some of WinCo’s 400 nonexecutive workers, including cashiers and produce clerks, have pensions worth over $1 million because WinCo puts an amount equal to 20% of employees’ annual salary into a pension plan.

And WinCo is going to Texas, competing with Wal-Mart and offering lower prices.

During the recession, Wal-Mart cut employees hours so deeply that stores could not keep their shelves stocked causing customers to go elsewhere. In the past five years, the U.S. workforce dropped by 120,000 while the company opened 500 new stores. With longer check-outlines, backlogged inventory, and poor customer service, Wal-Mart will move 35,000 part-time workers to full-time and another 35,000 temps, who have to re-apply for their jobs every 180 days, to part-time.

The Affordable Care Act will require new full-time employees to get health insurance after 90 days instead of the usual six months. Workers still have to be employed an average of 30 hours a week for a year to get the benefits; most “associates” at Wal-Mart don’t have the opportunity to work this many hours.  

Food for thought as you schedule your shopping this week.

February 25, 2013

Reasons to Raise the Minimum Wage

In his State of the Union address last month, President Obama dropped a bomb shell when he recommended increasing the minimum wage from $7.25 to $9.00 with subsequent increases for inflation. The far-right had screaming fits about this action losing jobs, destroying the economy, and decimating the wealthy.

What would be the effect of this increase? An additional $18 billion in local economies, added tax revenue, and stabilized families who could either keep their homes or find one. Thirty million people across the country make less than $9 per hour. Nearly five million people earn just $7.25, grossing $15,000 a year. The loss of manufacturing and public sector jobs has put more and more people at or close to minimum wage. With a wage of $9 per hour, a person could gross $18,000 per year.

Anecdotal evidence from the 20 states where the minimum wage is higher than the federal rate indicates no issues with job loss linked to salaries. In fact an increase in minimum wage may actually help through reduced labor turnover, significantly saving costs.

Every decade for the last half century, the minimum wage has fallen below inflation, making $7.25 much lower than its equivalent in the 1960s. Yet worker productivity has increased five-fold within the past 20 years. The profits go only to corporations and the wealthy so that they can stash is overseas.

Wal-mart employs 1.4 million U.S. employees, which comprises 1 percent of the U.S. working population. The company’s net profit of $15.7 billion is $11,200 net profit per employee, about 12% higher than the average profit-per-employee for privately-held companies in 2009. A 20-percent increase in wages will allow their employees to buy far more things from Wal-Mart while dropping the net profit to almost $13 billion without any extra sales.

An examination of four successful companies by Zeynep Ton shows the benefits of higher wages. High-performing employees, for example those at Costco who are paid much more than those at Wal-Mart, lead to good operational execution and thus high sales and healthy profits. By contrast at Wal-Mart, low labor budgets lead to poorly trained, poorly motivated, understaffed work forces, which then lead to poor operational execution, resulting in poor sales and razor-thin profit margins. This problem is evident with a recent drop in sales for Wal-Mart:  “February (month to date) sales are a total disaster… the worst start to a month I have seen in my… 7 years with the company.”—Jerry Murray, Wal-Mart’s vice president of finance and logistics.  

Even The American Conservative thinks that the U.S. government should raise the minimum wage, perhaps to $10 or “more likely $12 per hour.” The first rationale is that most minimum-wage jobs in this country  are retail or support services and thus cannot be outsourced. “Perhaps consumers would pay 3 percent more for Wal-Mart goods or an extra dime for a McDonald’s hamburger, but most of the jobs would still exist and the price changes would be small compared to typical fluctuations due to commodity and energy prices, international exchange rates, or Chinese production costs.”

The article points out that minimum wage in Canada is “well over $10 per hour,” France has more than $12, and Australia has nearly $16.50 with 5 percent unemployment.

As most economists agree, “raising the annual income …  by eight or ten thousand dollars would immediately send those same dollars flowing into the regular consumer economy, boosting sales and general economic activity. In effect, the proposal represents an enormous government stimulus package, but one targeting the working-poor and funded entirely by the private sector.”

To show that even big business wants a higher minimum wage, the article explains why Wal-Mart lobbied Congress in 2005 for an increase. The management of this company knows that their employees can’t even afford to shop at their own stores. But if they raise wages without a mandate, they’ll have to raise prices, losing business to competitors. If everyone has to increase wages, prices will go up everywhere. . If Wal-Mart can raise salaries, it can bring in about $1.3 billion in revenue while paying out just half that to its employees.

Increasing the minimum wage for people in the lower income strata would greatly help Social Security, Medicare, and other government programs funded by the larger paychecks. The government would have to pay less for Federal Earned Income Tax Credit (EITC). “Private companies should fund their own payrolls rather than rely upon substantial government subsidies.” I agree with these conservatives!

The same companies that complain about increased worker wages have no problem increasing executive salaries, dramatically shifting the distribution of income. During the 35 years before Ronald Reagan’s two presidential terms, the top one percent of U.S. households took an average of 10 percent of the nation’s income. By the time that Bush I took over, the top was given 15.5 percent of the income, and 12 years later when Bush II was appointed to president, this percentage changed to over 20 percent. When the recent recession let up, the three largest employers of minimum wage workers, Wal‐Mart, Yum! Brands (Pizza Hut, Taco Bell, and KFC), and McDonald’s, all more profitable, awarded their top executives multi-million dollar compensation packages.

The GOP should be happy that the president recommended only $9 per hour. Some people suggest a greater increase, as much as $12.25 that would raise the annual salary to $25,000. According to one study, the cost to major retailers would be $20.8 billion, about 1 percent of the sector’s $2.17 trillion in annual sales. The raise would add $4 billion to $5 billion in annual retail sales because workers have more money.

“If retailers pass half the costs of a wage raise onto their customers, the average household would pay just 15 cents more per shopping trip — or $17.73 per year,” the study found. “If firms pass 25 percent of the wage costs onto their customers, shoppers would spend just seven cents more per shopping trip, or $8.87 per year.”

Nearly three-fourths of likely voters want a $10 minimum wage attached to inflation.  A 56% majority of voters believes that increasing the minimum wage would help the economy, compared to just 21% who say it would hurt the economy. Another 16% say it would have no impact.  Attacks against the minimum wage on fail to resonate with voters.

In rejecting the idea of raising the minimum wage, Republicans show that they have a low regard for workers who make so little money. The GOP calls them “takers” because they might not survive without Medicaid and food stamps. These people who make so little money are then derided because they won’t take responsibility for earning a living. Labor Day has always celebrated the work of laborers, but last fall House Majority Leader Eric Cantor (R-VA) praised the business owners, ignoring the real workers.

Much more must be written about the minimum wage. But for today, I’ll end  with a map showing how many hours a month each person making minimum wage must work to pay for an apartment:

hours needed apartment

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